It is no secret that the Adventure Rich family have a few savings accounts for our short-term goals. And it’s no secret that we prefer housing these savings accounts with Ally Bank. But we may have a problem…
Mr. Adventure Rich and I just opened two more savings accounts with Ally Bank in 2017.
If you have been following our monthly updates, you will know that this brings our savings account total to six.
That’s right, six separate savings accounts (not including retirement or college savings)! Are we addicted to savings accounts?!?
Why Savings Accounts?
Let’s start with savings accounts in general. With the most profitable savings accounts only cranking out interest rates to the tune of 1.1%-1.4% (according to a quick Google search), why would we house money in savings accounts? Wouldn’t an investment account of some kind be more advantageous?
Great questions. While an investment account of some kind would yield higher interest rates in the long run, Mr. Adventure Rich and I prefer to save for short-term goals in savings accounts for two primary reasons.
Reason #1: Low Risk
Savings accounts provide Mr. Adventure Rich and I with both a guaranteed safety net and a small return on my savings. We save our money in a FDIC insured bank (Ally in our case) and receive a 1.15% return. We are guaranteed this money when we want/need it, and do not have to be concerned about the cyclical stock market fluctuations.
If we were to invest our savings in index funds or ETFs, on the other hand, we would expose our money to the potentially wild ride of the stock market ups and downs. While this risk is one we will gladly take for long term goals such as retirement, we are not willing to take this risk with our short-term savings goals or our emergency fund money (what’s the point of an emergency fund if the $10,000 invested can drop to $4,000 precisely when you may need it the most?).
Reason #2: Flexibility
Savings accounts allow us to move money in and out of our accounts with ease. We do not have to be concerned about the term on a Certificate of Deposit or the rules of an IRA. We simply keep the money cozy in its saving account house until needed, then click a few buttons and have the money in our checking account the next day.
The key here is that for our short-term goals (money potentially needed within the <1 year to 5 year range), a savings account is an ideal place for Mr. Adventure Rich and I to house our money.
Why Separate Savings Accounts?
So, Mr. Adventure Rich and I are fans savings accounts… but not just one. We enjoy our multiple savings accounts, each tailored to a specific goal.
When we had one lonely savings account for all of our short-term goals, we found that we were much more likely to “steal from Peter to pay Paul”. We found ourselves tempted to dip into our Emergency Fund to pay for a vacation or go over budget on a used car purchase because “the money was there”. Not good!
Once we realized that Ally allowed us to quickly and easily open multiple savings accounts under our general “Adventure Rich Family” log in, we were off to the races! We quickly separated out our accounts and almost immediately found that we looked at withdrawing from savings differently. Questions arose that caused us to pause and think twice before withdrawing money.
Is this really an emergency?
Do we really count this as “home maintenance”… or is this just a “nice-to-have” appliance we do not really need?
Do we have enough money (without looking at the other funds!) to purchase a used car in this price range?
These questions are much easier to answer when we have separate, dedicated accounts to keep us honest and focused on our goals.
Mr. Adventure Rich and I could no longer fudge the numbers, covertly “borrow” from our emergency fund or get away with little withdrawals here and there. As soon as we separated the accounts out, we could see each and every goal. We were accountable to each and every goal. And we became much more likely to stick with each and every goal!
Why Six Accounts?
No, six is not our lucky number. For some reason, six accounts currently fits our various short-term goals. It helps us to keep our priorities straight and stay motivated.
Emergency Fund: Maybe a bit self explanatory, but this is our cushion for the unexpected things life may throw our way. We like it separated so we have less of a chance of dipping into this account for a non-emergency item. And yes, I did title the account “Emergency Fund- No Touchy”. Never hurts to add an extra reminder!
Charity Fund: Personally, Mr. Adventure Rich and I feel very blessed to have been given much in our lives and to be in the position we are in. While we plan to give back in many ways (community organizations, volunteering, etc), we also are willing and able to give monetarily. We recently fulfilled a pledge we made to our parish for an annual giving campaign. We also like to keep some extra money in here for the “impromptu” giving opportunities such as a family member in need or a YouCaring/GoFundMe for someone we know who is experiencing a tragedy or hardship, so we will be working to build this fund up in the near future.
Homestead Fund: Back in October 2016, we bought a house… on 10 beautiful acres! There are so many things we’d like to do, ideas we have and basic maintenance needs to complete (such as a new roof within the next few years). As a result, we decided to start a “Homestead Fund” to save for and fund these needs. We keep it separate from our Emergency Fund because we see these expenses as “foreseeable” and “plannable”, so we are planning financially as well as organizationally (gathering quotes, planning the timing and sequencing of necessary maintenance).
Vehicle Fund: Similar to the Homestead Fund, the Vehicle Fund is for vehicle expenses and/or a new (read: used but new to us) car whenever one of our current cars decides to conk out. While we don’t aggressively fund this, but we try to throw a few dollars in ($50-$100) per month. Mr. Adventure Rich is also eyeing a used tractor at some point to help with the upkeep and improvement of our 10 acres, so this fund will also serve as a savings account for the tractor as well.
Investment Fund: This fund’s goal is a big “TBD!”, but we have it just the same. We are toying with the idea of Real Estate Investing, so we wanted to begin to dedicate funds towards this goal. If we decide to steer away from Real Estate, we will divert these funds to IRAs or some other investment vehicles.
Fun Fund: Vacation? FinCon 2018? Other?!? We all need a break and a little fun in our lives, so this fund is dedicated to having a few dollars stashed away for an adventure, planned or spontaneous.
So… Are We Addicted to Savings Accounts?
I think the answer may be “yes”, but for good reason…
Mr. Adventure Rich and I absolutely love having our multiple savings accounts, each dedicated to a specific short-term goal. This strategy helps us to not only stay motivated when saving for each goal, but it also keeps us accountable and honest when it comes to withdrawing from our funds.
Anyone else have a plethora savings accounts? Do you find it helpful? Or are we just crazy for having six different savings accounts?
Always an Adventure,
Mrs. Adventure Rich